The termination of the agreement, which dates back to 2006, will become effective in April 2012 and will result in 40 million euros of additional costs for the German company's Merck Serono division in the fourth quarter of 2011. The decision was made as part of an "ongoing review and re-prioritisation of the company's R&D pipeline".

However, Merck added that "safinamide has a more limited market potential than originally anticipated". The Darmstadt-based group added that the book value of the drug was initially written-down in the fourth quarter of 2010 and fully written-off in the second quarter of 2011.

Merck went on to say that it will meet its "contractual and ethical commitments regarding the ongoing clinical development programme for safinamide".

Newron, which is in the process of merging with Finland's Biotie Therapies Corp, is more enthusiastic about the prospects for safinamide. The firm noted that the decision by Merck is not based on any new efficacy or safety findings and results from two Phase III trials are scheduled to report results in first half of next year.

Newron added that, along with Biotie, it will "now re-assess all the opportunities for safinamide including re-partnering the compound at some stage". It added that a collaboration with Merck on two other investigational drugs - pruvanserin for insomnia and sarizotan for Parkinson's - will continue.